Oct 20, 2017 - Market Update (US Senate moving on budget, US jobless claims hitting multidecade low - positive on spending/GDP/inflation/USD, Catalonian bank run, S&P 500 tested the support around 2544/40, Earnings to set the tone for today's trading, Schlumberger results important for correction in energy stocks)

Short recap

Asia up after some hesitation at the beginning

Europe opening higher

US Senate moving on 2018 budget, next step towards tax reform

US jobless claims hitting multidecade low what means more people working, more money for spending

As consumption is 60% of US GDP, we can see in the future higher GDP growth pressuring up inflation

Merkel positive on Brexit progress but not at the stage to move to trade talks

Catalonian separatists supporting bank run what may send shockwaves across equity markets in Europe

BoJ’s Kuroda – to continue with powerful QE

Equities

Stocks had a test day yesterday on Catalan risk, speculations about high valuations and weaker earnings

Bias still negative today – a correction before weekend coming? Well, depends on earnings now…

S&P 500 tested the support (now around 2544/40) with resistance between 2573/75

But US Senate move with 2018 budget to reflect positive in today’s session

Apple hit by weak demand for iPhone 8

Greek banks Piraeus, National and Alpha looking to sell EUR 5.5 bln of bad loans

Nestle beefing up restructuring cost

Earnings

Weak in Europe – a strong EUR an issue or what?

Not stellar in US with slow revenue growth – are investors going to punish companies with sell off?

On the other hand low bond vs dividend yields still supportive for equities

Today: Daimler (disappointed), GE, Schlumberger, P&G, Honeywell

Energy market will focus on Schlumberger as any disappointment in outlook

Can translate into energy stocks correction that is already sitting on support

Little bit of perspective of Black Friday sell off in Oct 1987:

Few words as well…  link

  

…and back to today’s reality:

If all market participants are buying, there is no bear that can get converted to bull

If it is the case, there are no other buyers left…

  

But still some thoughts from Warren Buffett – video (49 min)

Bonds

10-yr Trys yield at 2.36%

10-yr Bund yield at 0.39%

EURUSD - ready to correct big time and trading below parity? Next week's ECB holds the key as the 2yr Trys-Bunds spread is at extreme  link

  

DXY

200 WMA at 93.05 critical

EURUSD

Expiring options at 1.1800 (EUR 1.5 bln), then 1.850-55 (EUR 1.4 bln)

Likely to range 1.1800/50 today unless we get a surprise…

Resistance at 1.1847 (50 DMA), 1.1862 (23.6% Fibo), 1.1880, 1.1910

Support at 1.1800/10 (200 HMA), 1.1787 (Ichimoku), 1.1750, 1.1720 (38.2% Fibo)

Source: Saxo Bank

USDJPY

Supported by higher yields on US budget news

Resistance at 113.43 with stops sitting above 113.50

To test 114.00, then 114.50 but stops above both levels

Exporters can be seen above 113.50

Support at 112.48 (10 DMA)

 Source: Saxo Bank

Gold

Resistance at 1289 (10 DMA)

Support at 1281 (50.0% Fibo), 1276 (100 DMA)

Source: Saxo Bank 

Data/events

China National Congress (Fri/Sat)

EU Summit (Fri/Sat)

Czech parliamentary elections (Fri/Sat)

BoJ’s Kuroda (0635 GMT)

Fed’s Mester (1800 GMT)

Fed’s Yellen (2330 GMT)

Oct 22 – Japanese elections

Oct 26 – ECB

Nov 1 – FOMC

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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